John Feldt ERPA CPC QPA

My understanding is that it is cumulative, that the preservation of capital requirement applies upon distribution unless the terms of the plan dictate otherwise, such as a zero percent annual floor. Using actual ROR can cause high 401(a)(26) minimums when there are low or negative investment returns and can cause low 415 lump sum payout limits when there are high investment returns, so be careful out there!

The IRS just said it will be $11,250 for the super de duper catchup.

Robert Richter just stated he believed the next COLA announcement will indicate the HPI determination for 2026. So if the comp number is $150,000 (up from $145,000), he believes that means in 2026 we look at comp over $150,000 paid in 2025 for determining HPI's in 2026.

If you can explain this from Code section 45E, sure: (iii)Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 2023, the $100,000 amount under clause (i) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2007” for “calendar year 2016” in subparagraph (A)(ii) thereof.  If any amount as adjusted under this clause is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.

The CPI-U for July, August, September of 2025 are all published with values of 323.048, 323.976, and 324.800 respectively. Based on Tom Poje's spreadsheet, the dollar limits for 2026 will be: NOT Official via any IRS pronouncement yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) (Super-Catchup, age 60-63 = $11,250, (unchanged) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000) the 2026 HPI comp number should be $150,000 (up from $145,000) It's unclear but my guess is that means in 2027 we look at comp over $150,000 paid in 2026 for determining HPI's in 2027. The official taxable wage base for 2026, announced by SSA, is $184,500 (up from $176,100).

The taxable wage base for 2026, announced by SSA, is $184,500 (it's $176,100 in 2025). https://www.ssa.gov/oact/cola/cbb.html

I am going to guess regarding the $145,000 HPI limit. This was stated to be adjusted the same way as the others, but using 7/1/2023 - 9/30/2023 as the base period for years beginning after 12/31/2024 with increases occurring in $5,000 increments. Thus, $145,000 was the limit for 2024 when the law required mandatory Roth Catchups to begin (and in an unusual move by the IRS, we were allowed to ignore the law in 2024 and 2025), and the COLA for the 2025 HPI limit would have been increased this as follows: $145,000 x (314.540 + 314.796 + 315.301) / (305.691 + 307.026 + 307.789) = $148,799, which is not $5,000 more, so no increase for 2025, stayed at $145,000 But, for 2026: $145,000 x (323.048 + 323.976+ 324.800) / (305.691 + 307.026 + 307.789) = $153,077, which is at least $5,000, so the 2026 HPI comp number should be $150,000 It's unclear to me based on the law/regs, but my guess is that means in 2027 we look at comp over $150,000 paid in 2026 for determining HPI's in 2027.

If you are numbers nerd, the unrounded values are: Deferrals: $24,683 Catchup: $8,227.50 Compensation Limit: $364,460 Annual Addition Limit: $72,892 DB Limit: $291,568 HCE: $164,680 Key Employee: $236,899

Sorry for the delay - so many meetings! The CPI-U for July, August, September of 2025 are all published with values of 323.048, 323.976, and 324.800 respectively. Based on Tom Poje's spreadsheet, the dollar limits for 2026 will be: NOT Official via any IRS pronouncement yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) (Super-Catchup, age 60-63 = $11,250, (unchanged) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000)

If the employer might ever want the easy way out of safe harbor during the plan year, then provide the notice and make sure it includes the language that says the employer can amend to exit safe harbor at any time after providing a 30-day advance notice to participants, ending safe harbor contributions thereafter. If the 3% is a QACA SH nonelective and the plan has a match exempt from ACP, even without the notice you can still find the match and avoid ACP. But only if it’s QACA.

You can test on a contributions basis to avoid gateway. That would increase the 1.87% to something higher to be at the HCE rates with imputed disparity. But first you must pass coverage, so start by allocating something to get to 70% coverage, say $100 to enough NHCEs to get your 70% - maybe pick the lowest paid NHCEs, or whatever is preferred by the employer Coverage passes, so let’s now move on to nondiscrimination testing. Pick just enough NHCEs to get that higher PS needed to be at the HCEs midpoints (use imputed disparity if that helps). Run ABPT either on a benefits basis or a contributions basis, whichever is better. If the ABPT passes, you’re done. Otherwise, troubleshoot what is needed.

The cash balance plan satisfies 401(a)(4) on its own. Frozen plan? Just curious.

Yes, Ilene’s case was bonkers bad.

Is there any intent or need for the plan to be exempt from top-heavy? if yes, then allowing deferrals prior to safe harbor entry can be a problem with these entry requirements. The OEEs won’t get TH, but some non-OEEs might.

The only exception to the exclusive plan rule for a SIMPLE is a safe harbor 401(k) plan. The rule required the SIMPLE to end and the safe harbor 401(k) deferrals to begin the next day and the deferral limits are then pro-rated for the year. I agree that the safe harbor 401(k) plan must have at least 3 months of deferrals in the year to allow the plan to be safe harbor, so you may likely be out of time for 2025.

The rules under 408(p) rules say a SIMPLE must be the exclusive plan for the Employer and Employer is defined as all businesses in the controlled group/affiliated service group.

Austin, You queried, “what if the purpose of the amendment is to reduce how much you need to contribute to the plan to get testing to pass? Is that a "Retroactive plan amendments that increase benefit accruals? I think it would be hard to argue yes...” I would say 100% yes. Isn’t a retroactive increase in an amount to a NHCE under treasury regulation 1.401(a)(4)-11(g) sometimes exactly that scenario? I believe so and the regulation specifically allows it. Otherwise, one could almost always argue the plan could have passed in another way without that -11(g) amendment, and if so, then that defeats the purpose of the reg.

Yes, as long as they are getting some form of employer contribution, then their wages must count in the limit.

No, the 6% and 31% are limits, not offsets. Suppose you have a plan that defined the benefit as $X minus the value of a benefit provided to the participant under another employer’s plan. That’s an offset.

Yes, of course. Thank you!

If the cash balance plan is not subject to PBGC coverage and if there is at least one employee who is in both plans, then the deduction limit for both plans combined is 25% of eligible compensation, ignoring the first 6% of pay contributed to the defined contribution plan (count all employer contribution types but not salary deferrals). This combined plan deduction limit is avoided if the sum of all employer contributions to the DC plan (all employer contributions, but not salary deferrals) is not more than 6% of the sum of all eligible compensation.

The plan lives on within the surviving plan. The company does not execute a resolution to terminate for a merger of plans.

Be sure to be aware of the predecessor plan rules for counting service for vesting. Especially Treasury Regulation 1.411(a)-5(b)(3)(v)(B)(1). ”within the 5-year period immediately preceding or following the date another such plan terminates” - my understanding is that the “preceding” requirement can retroactively cause service prior to the plan effective date to be counted for vesting when such plan terminates.

If coverage passes and the nondiscrimination test passes for the year, then you’re almost there. Take a look at the Carol Gold Memo and see if the benefiting group of NHCEs are primarily short service, low paid, and receiving nominal benefits. There’s no bright line for that. So after reviewing that, does the employer think the plan satisfies treasury regulation 1.401(a)(4)-1(c)(2)? It’s their call.

The CPI-U for July 2025 was published with a value of 323.048. If inflation is 0% in August and September, based on Tom Poje's spreadsheet, some of the dollar limits for 2026 are projected to be: NOT Official yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000)